Failed startups and why the IT sector is vulnerable

Cristian Level X³

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September 3, 2017, 12:55 pm

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Failed startups and why the IT sector is vulnerable

The total sum wasted on the top 10 startups of 2017 is equal to 1.7 billion dollars accordingly techcrunch.com - all this money comes from banks and independent investors or venture capitalists.
Keep in mind 2017 isn't over yet so we are bound to see more startups fail until the year ends.

So why are all these startups fail even before they start producing any profit?
Because the investors gambled everything on an idea that wasn't yet producing any money, everyone wants strike success with a new Google or a new Facebook, but I'm afraid those times had long sailed.

Google, Facebook and other big companies like Microsoft can always adapt your brilliant idea and kill your startup in its infancy. Betting on ideas isn't the way to go in 2017, especially in the IT industry.
I believe in profit if you are making a profit your are doing something right and that tells me a lot about your startup. We have too many Zuckerberg wannabes running around claiming they are going to be the next SnapChat.

So here is the list of the top startups fails of 2017:

10. HomeHero - managed to waste: 23.02 million US dollars
9. Hello - managed to waste: 40.51 million US dollars
8. Pearl - managed to waste: 50 million US dollars
7. Spring - managed to waste: 56.7 million US dollars
6. Yik Yak - managed to waste: 73.5 million US dollars
5. Auctionata - managed to waste: 95.65 million US dollars
4. Juicero - managed to waste: 118.5 million US dollars - Probably the stupidest idea of this list. These guys seriously believed they have invested the "iPhone of juice makers" by virtually producing a $600 product that squeezed a bag of juice.
3. Beepi - managed to waste: 148.95 million US dollars
2. Quixey - managed to waste: 164.9 million US dollars
1. JawBone - managed to waste: 590.8 million US dollars

I believe a serious global financial crisis is overdue and the outcome can be catastrophic for the IT and Digital sector. Why? Because most of the small digital orientated companies of today haven't been around back in 2008, few went through an actual financial crisis and can understand the implications.

Once the investors stop investing into "ideas" that don't turn a profit around yet you will have a lot of bankrupt digital agencies out there incapable of maintaining employees as well as their current life style.

What do you think? If a 2008 style financial crisis will break the next few years, how affected do you think the IT sector will be? Especially digital services like web development, web design, digital marketing or even SEO?

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overcast

I think due to VC money many people are taking the risk the wrong way. They don't validate their business model. And this means that could be one hard way to monetize many ideas. I guess IT sector needs to focus on making money instead of making unicorns. You have to find out how the startups can be used for gaining more leads. IT sector has plenty of things to learn and focus on. So I am guessing startups should be mindful about that.

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Corzhens

My take on the issue is the mentality of people. An IT consultant or expert has a mind about technology, right? Maybe that guy can invent new programs or apps that we can use for improving what we are presently doing now. A startup company is a business and what you need is a businessman. If you have read the life of Steve Jobs, he was so good in technical but he failed in the business management department.

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overcast

I think most of the IT based innovators just want to innovate and sell the company to those who want to execute and manage. And in that process they are selling the company. So they are less likely to execute and need VC Money. So that way startups are more risky. Because they can go down any time.

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DarthHazard

I laughed when I saw Juicero on the list. I didn't realise that they had closed down because the last time that I saw an article about the company, they had defended their product. It's literally the stupidest product that I have ever seen, to be honest. Why would anyone want to buy such a thing especially since how expensive it is. The problem now is that people are trying to find solutions for things that do not need a solution and trying to charge stupid prices for them.

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Barida

It's really ridiculous that some companies would setup and decide not to make quality products for the consumers out there. One more thing that annoys me is the expensive nature of some of these products as well.

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Authord

Well, almost all startups are bound to experience a slack down, at some point in time, but only a few can survive. I can remember on how apple started, they nearly closed down, if not for the intervention of Bill Gates, who gave some money to Steve Jobs, to support the company and prevent it from closing down. We would have been talking about how Apple was a failed startup.
What am trying to saw, is that for almost every startup in the IT-sector, you will experience a slack down, and if you don't actually know what you are doing, you will go down the drain. The IT-sector is a tricky and slippy sector.

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coolavender

Venture capitalists can learn a thing or two from Zuckerberg when it comes to investing in startups. Notice that Facebook had dramatically cut its startup companies acquisition binge and is focusing on developing what it currently has. That binge had inspired a lot of digital products and IT companies who were hoping to be acquired by giant tech companies like Facebook and Google.

I think that there will always be a venture capitalist who will be wiling to part with money and take risk with a start up company and a new idea. Likewise, I don't see that financial crisis will dampen the growth of companies engaged in web development, digital marketing, or seo as these services are essential in the operations of most businesses today. In fact, there are still a lot of small businesses that require stronger online presence.

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Pixie06

The IT market seems to be saturated in my country and it will quite tough for a new company to survive. The established companies will drive them out of the market. To be able to make some profits your product must be different. You must screen the market before investing. You must also use the right advertising strategies.

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Barida

That's the same issue that we are having in my country in the sense that some of these companies that want to start up newly won't bring a good change, but still want to dominate the market which is not the right way to go about it.

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Corzhens

I believe that it’s a bandwagon effect why there are so many start ups. And they fail because they are not serious with the planned business. Maybe some of them were making the start up on a whim just to say that they are a businessman. But in fairness to the failed start ups, I’m sure those investors have money to burn because if not then you will be very careful and will follow the proper procedures in starting up a business. .

0 6 years ago

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jaymish2

I think I may start up his own risk there's no guarantee that it's going to make it I would not call them not making without some money. I don't think it’s something to be concerned about.Most of these startups are trying to find solutions to everyday problems.Sometimes they succeed intense they don't. Most of these startups founders go on to start other companies that succeed. They learn lessons, although expensive lessons. I would give you the example of money that goes into cancer research .They have never found a cure but they always keep trying and they find more updated ways to treat the disease.

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